Chokepoints: Economic Warfare in the Modern World, with Edward Fishman
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Welcome to Intelligence Squared, where great minds meet. I'm producer Mia Cirenti. Our guest today is Edward Fishman, one of the foremost experts on economic statecraft and sanctions.

Fishman has worked in the US State Department, the Pentagon and the Treasury Department, and he now works as a professor at Columbia University's School of International and Public Affairs and as a senior research scholar at the Center of Global Energy Policy. His writing on global policy and economic strategy have been featured in outlets including The New York Times, The Wall Street Journal and Foreign Affairs.

In his new book, "American Power in the Age of Economic Warfare," Fishman explores how economic tools like sanctions, trade restrictions, and financial levers have become the U.S.'s primary means of addressing international crises. Joining Fishman to discuss the book is Chris Miller, author of Chippewa and professor of international history at the Fletcher School at Tufts University.

CHRIS MILLER: Welcome to Intelligence Squared. I'm Chris Miller, and our guest today is Edward Fishman.

Welcome, Eddie, to Intelligence Squared. Eddie Quint: Chris, thanks so much for having me on today. I'm excited for our conversation. Let's start with your background. Of course, you're not just a scholar looking at these topics. You've also served as a practitioner in the U.S. government as it developed sanctions, in particular on Iran and then on Russia. First off, how did you get involved in this sphere? What drew you to sanctions?

Sure, Chris. So I was a student of history and international relations in the years immediately following 9/11. And I just remember thinking that there was this paradox that I picked up on in my classes, which is that we were learning that America was the world's sole superpower and potentially the most powerful state that we'd seen since ancient Rome. And yet at the same time, we were struggling to achieve what we wanted in the world. The wars in Afghanistan and Iraq very quickly became quagmires that were seen as failures.

Right when I was in college, my formative years, is when Iran's nuclear program became the top priority for the U.S. national security state.

And there was a real debate about what to do about it. There were some who were arguing for bombing Iran's nuclear facilities, but it was quite clear that there was no political appetite for another war in the Middle East. And many people didn't think that would work. And so I was really inspired to get into the study of economic statecraft for lack of a better alternative, thinking that military force had lost its efficacy, had lost its political support, and that we needed some solution to Iran's nuclear program.

But another war was not viable. And so it was right sort of at that period that the Treasury Department started pioneering new uses of sanctions that, you know, really took advantage of these choke points in the global economy, like correspondent bank accounts, the dollar clearing system.

A week after graduating from college, I started at the Treasury Department and was, as you said, lucky enough to get to play a role in the sanctions that led to the Iran nuclear deal, as well as creating sanctions against Russia after its annexation of Crimea in 2014. Of course, since you left government, the role of sanctions in U.S. foreign policy, as well as the foreign policy of other countries, I think it's worth noting,

has probably only increased. You titled your book Choke Points. I think this concept is really critical for understanding where sanctions do work and where they don't work. What is a choke point, and how do you define it? A choke point is a part of the global economy where there's very little redundancy. I think these were created largely in the wake of globalization, and particularly the hyper-globalization of the 1990s, in which we got things like really deeply integrated financial markets and supply chains.

Sometimes, there's a state that will have dominance in something. For instance, textile manufacturing is concentrated in certain countries in East and Southeast Asia. But those aren't choke points, because there is redundancy. If they were cut off, if all of a sudden we could no longer import T-shirts from Bangladesh, we'd find somewhere else to get T-shirts from.

What distinguishes a choke point is that there's really only one state that controls, or maybe one state or a small coalition of states that controls the critical components of a process. I think the most important choke point that we discuss, that I discuss in the book, and I think that's most relevant for sanctions, is the use of the dollar, where there really isn't

any equivalent to the dollar as a medium of exchange or a store of value in the international financial system. Part of the story of the book and a story that you also tell well in your own writing is the development of other choke points, including in the semiconductor supply chain and

for AI that we're seeing now, and even in energy supply chains, whether it's oil tankers and maritime insurance. Some of these choke points are more potent than others. There are fewer redundancies, whereas others can be evaded more easily. I think the other key point from the book, and one that's very important when you're studying and looking at economic statecraft today, is that these choke points change over time. As industries evolve, as new technologies emerge,

You know, there will be new choke points tomorrow that are just as potent as the ones that, you know, the U.S. and China and other countries weaponized today.

The choke points that we've seen develop over the last couple of decades, to what extent do you perceive these as having been planned vs. accidental? I think almost certainly they were -- I say certainly, largely they were accidental. I think this is something that is one of the almost ironic macro narratives of the book, which is that it is actually neoliberalism, the deregulatory drive of the 1970s, 1980s, 1990s,

That does lead to this really thorough globalization of the dollar, first of all, and the American financial system, followed by supply chains, the global oil market, and then, of course, finally with more technological supply chains that really start taking off in the 90s through the present.

And so in many ways, it's a story of the private sector creating these choke points, being enabled by governments that are reducing trade barriers, reducing barriers on things like capital flows, which had been integral to the Bretton Woods system but were alleviated in the 1970s.

And then really the government and the U.S. government primarily. But then, as you state, other governments, too, like the Chinese understanding that these choke points could be weaponized. And so sort of as this understanding is built in the U.S., primarily in the in the early part of this century, you know, it's not just enough to realize it. You also need the legal apparatus to act to weaponize these choke points. So you need an American regulatory state to build that actually can do things like sanctions that are impactful.

I think one of the really interesting stories of the book is how banks used to view financial sanctions as almost a joke, like a cost of doing business, sanctions violations.

It really wasn't until Stuart Levy, who was the first Treasury Department Undersecretary for Terrorism and Financial Intelligence, really started going on a global roadshow threatening banks with things like secondary sanctions, and then also seeing the Department of Justice get involved with significant fines on banks for sanctions violations, that you see the global financial system take U.S. sanctions seriously and basically be conscripted as these frontline soldiers in American economic warfare.

I'd love to get into the differentiation between primary and secondary sanctions. Before we turn there, can you reflect on what makes our current moment similar or different to prior periods of economic statecraft? Since the days of Thucydides or even earlier, there's been an interrelationship between foreign policy and economic tools. What's unique about the present day?

Sure. You're exactly right. Economic warfare is as old as history. Go back to Thucydides, you see the Megarian Decree as a classic example of a trade embargo. Napoleon in the Continental System was a form of a trade embargo in the early 19th century. Even, of course, the U.S. sanctions on Japanese oil shipments leading up to Pearl Harbor.

I think the thing that is so different today is there are really two things. One is that the use of sanctions today to be powerful does not require the backing of naval force. Historically speaking, Athens was able to have this embargo on Megara because they had a maritime empire that was backed by

the largest Navy in the world that would blockade ports. Even, you know, you go back to, you know, U.S. embargoes of the 20th century, they were backed by naval force. Of course, the classic British embargoes. And even in the 1990s, the Iraq embargo, you know, that was put in place by the U.N. Security Council after the Gulf War was backed by a multinational naval force.

And so, I think what that meant was, there was a higher threshold to the use of economic sanctions, because to make them impactful, you needed to deploy military force. But also, they were kind of seen as almost a step toward the use of military force. There wasn't as clear of a dividing line between economic statecraft and military statecraft. I think the other thing that's so different today is that, historically speaking, unless you're dealing with empires, like the Athenian Empire or the British Empire,

You really needed a very broad multilateral coalition to make sanctions work. And that's why I think at least in the latter half of the 20th century, the UN sanctions were kind of seen as the gold standard. You needed the backing from the UN Security Council in order for sanctions to work.

And of course, in this day and age, that's really hard. When you have great power competition between the U.S. and China and Russia, the U.N. is no longer viable as a coordinating mechanism for sanctions. What these choke points did, coupled with the expansion of the American legal apparatus and regulatory state, is they gave the U.S. unilateral power over the global economy, and it made it

kind of irrelevant to deal with things like the UN Security Council. All of a sudden, you could have an official who probably nobody knows about, the director of the Office of Foreign Assets Control at the Treasury Department, sign a document and impose sanctions that were much more aggressive than even the UN-backed trade embargoes of the 1990s.

Let's dig into OFAC as it's known. You mentioned earlier the extent to which sanctions enforcement was ramped up and the threat of secondary sanctions began to be levy. Can you walk us through that moment and explain what changed and why that was such a powerful shift?

Yeah, it really does come in this period kind of in the mid-aughts when it's very clear that Iran is developing a very serious nuclear program. This is happening in the wake of the US invasion of Iraq, which was ostensibly, you know, it was justified to get rid of a nuclear program in Iraq that didn't exist. And so all of a sudden you had this very

ironic situation where the US had invaded Iraq to prevent an illusory nuclear program, and then you had a real nuclear program developing in the country next door, and there was no ability to use military force. What winds up happening is, Stuart Levy becomes the first head of this new department of the Treasury called the Division of Terrorism and Financial Intelligence, it oversees OFAC.

And he basically understands that -- his background as a lawyer -- that it's not just about getting other countries on board with sanctions. In fact, countries can sometimes be secondary. The key thing was getting banks on board. He could go talk directly to the CEOs of banks in Europe and Asia. So, he basically goes on this roadshow, 2006-2007.

Declassifying intelligence, telling banks exactly what Iran is doing to manipulate the formal financial system to support its nuclear program. Many banks just decided they don't want this reputational risk. There are certain numbers of bank CEOs that even just setting aside the potential financial downside of sanctions violations, they decided to get out of Iran.

There are a few stragglers. You have HSBC, which continues doing business with Iran, Standard Chartered, BNP Paribas. What happens in the years that follow that is those banks are fined billions of dollars for violating sanctions. They're not just fined, they're also really intrusive compliance regimes that are imposed on them by the Department of Justice. Corporate monitors put in place that are effectively monitoring their compliance protocols.

And so, banks really can no longer view sanctions violations as a cost of doing business. I think the other factor here, too, is during the Obama administration, you have a bipartisan supermajority in Congress led by people like Bob Menendez, the former New Jersey senator, and Mark Kirk, who at the time was a Republican senator from Illinois.

who basically come up with really draconian sanctions laws that pass with veto-proof majorities. And so what that does is it kind of forces the Obama administration to be much more aggressive than it would otherwise be. And as a result, you wind up actually getting the authorities that are needed to, for instance, persuade China to reduce its imports of Iranian oil, which was something that I think was unthinkable before you had the threat of secondary sanctions. And what made it so hard to...

So, no one just set up a new bank in a country that wasn't part of the U.S. coalition, like in China or somewhere else, and start financing these trade relationships on their own? Why were these so effective at blocking out any new competitors?

Yeah, sure. The way that, for instance, the Iran oil sanctions work, which were the most important ones, was they really worked through the threat of financial sanctions on foreign banks. If you think about it, when Iran is selling an oil shipment to a Chinese refinery, it's getting paid through the banking system. Ideally, it's getting paid in a hard currency like dollars. There's going to be a Chinese bank on the other side of that transaction.

And so, what the U.S. realized was, it could go to those Chinese banks and say, "Look, if you pay Iran and you don't comply with the protocols we put in place, we will sanction you. That means that you will be fully cut off from the dollar." Even banks in China, even banks in places like India and the UAE,

being cut off from the dollar was something they weren't willing to risk. And certainly not willing to risk just because they wanted to facilitate transactions for Iran's oil sales. That's because most international trade, even when two non-U.S. countries are involved, use the dollar as a way station. And so, for these banks, it was not worth the risk.

You make a good point that there's always some folks who are willing to take these risks. There's one Chinese bank called Bank of Kunlun, for instance, that was sanctioned in 2012 for doing business with Iran and continued doing it. But I think what you wind up seeing is that at least

At the scale that Iran would need to have a fully thriving oil sector with significant export revenues that they then could use freely around the world, it's really hard to do that through one small Chinese bank that's under U.S. sanctions.

As a result of these measures you describe in the book, Iran's oil exports fall dramatically. That's a key factor that leads to its eventually signing the nuclear deal that was negotiated under the Obama administration. Around the same time, we have the Russian annexation of Crimea, the start of Russia's aggression against Ukraine. Officials in the Obama administration turned to some of the same tools.

to punish Russia. Walk us through how that thought process developed and what the similarities and differences were between those sanctions regimes. Sure. I think this is an area where it's important to think about the history and the chronology because I think folks often think of Iran sanctions in isolation from Russia sanctions in isolation from China export controls. But oftentimes, it's the same officials in the Situation Room making decisions on all of them. The context is very important.

I think one of the more interesting historical dates that we have in the book is November 24th of 2013, which is the day that the U.S. signed the Joint Plan of Action with Iran, the original nuclear deal that froze Iran's nuclear program. It was also the same day that

You first had 100,000 protesters pour onto the Maidan in Kiev, which of course starts the crisis that leads to the annexation of Crimea just a couple months later. And so I think this parallel is so important because the Ukraine crisis of 2014 really starts at the high point of confidence in the use of sanctions as a tool of statecraft.

U.S. officials were, in some ways, like it was, and I was there at the time at the State Department. It was, even for those of us who were true believers in sanctions, it was almost awe-inspiring to see that, wait, we just froze Iran's nuclear program without firing a shot. You know, this was just through the use of, you know, signing documents, like, you know, at the Treasury Department and the State Department.

And so, I think it was natural that policymakers were attracted to the use of sanctions against Russia. But I think that there was a big difference, which of course is that Russia was a very large economy. It was the eighth largest economy in the world at the time. I think at the time its GDP was larger than all the other economies under US sanctions combined. It was also the world's largest producer of hydrocarbons, so oil plus natural gas. So, it was a much harder sanctions target than Iran.

It helps explain why it took the Obama administration so long to develop sectoral sanctions against Russia. Again, just to go back to the timeline, the Ukraine annexation or the Crimea annexation happens in March of 2014 and the first sectoral sanctions don't happen until July. I think a lot of that is officials just trying to get comfortable with the idea of what it means to impose sanctions on Russia.

And I think you also see that there's real concern about blowback, you know, and I think this is a big theme that we now see in economic statecraft against China, which is, you know, it's not just that you worry about can we sanction Russia? Will it hurt?

the Russian economy, will it change Putin's calculus? It's, you know, how is this going to affect the American economy? How is this going to affect the global financial system? And will we have political support? You know, are we going to lose the next election because of the sanctions on Russia? And those were real concerns for the Obama administration in 2014. My dad works in B2B marketing. He came by my school for career day and said he was a big ROAS man. Then he told everyone how much he loved calculating his return on ad spend.

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And I guess there are two main differences between Iran and Russia. One was just size, as you say. And the second was probably

probably the degree of interconnectedness, especially with Europe, but to some degree with the U.S. as well. That shapes the types of sanctions that the U.S. is willing to impose. You mentioned the word "sectoral sanctions," which ended up looking very different than the Iran-style sanctions. Can you walk us through what those entailed?

MARK BLYTH: Sure, yeah. So with Iran, the main sanction that the US used, the most powerful sanction we used, was blocking sanctions. That's really when a target is fully cut off from the US financial system. They can't transact with US banks. And they also, to the extent they have assets in the US, they're frozen.

With the U.S. sanctions against Russia, blocking sanctions were considered too much of a risk, particularly a financial risk. Another piece of context here is that we're still in the aftermath of the global financial crisis, and the Eurozone crisis is very much still going on. There's real concern about financial contagion in Europe.

Coupled with the European Union, the Obama administration comes up with this idea of scalpel-like sanctions, or capital market sanctions more specifically, where big Russian banks and energy companies are cut off from financing from U.S. and European banks. They can still transact, they can still process payments, but they can't get loans, medium and long-term debt, and they can't raise equity on European capital markets.

I think it's a bit jargony, but the idea there is not to create some sort of immediate crisis in Russia, but really to prevent big Russian companies and banks from growing over time. It's more of constraining the economic horizons of Russia as opposed to creating an immediate crisis.

I think one of the ironies, though, is in the second half of 2014, you have the oil price collapse. You see oil prices go from over $100 a barrel to nearly $50 a barrel in a matter of six months. As a result, even though these sanctions were relatively mild, they wind up becoming part of this flywheel that pushes the Russian economy into a really dramatic crisis in the winter of 2014-2015.

And so, to your point, Chris, the fact that Russia is so interconnected winds up becoming a vulnerability for Russia. In some ways, I think one of the interesting lessons here is that the more interconnected an economy is, the more vulnerable they are to sanctions. So, even though the Obama administration tries to do these light sanctions, they wind up pushing Russia to the brink of a real serious economic meltdown.

How does that lead you to assess the efficacy of the Russia sanctions in 2014? With the Iran sanctions you described, there's a very clear linkage between sanctions imposed, JCPOA being signed. Sanctions were a key part. You wouldn't have had the JCPOA in the absence of sanctions. What about with regard to Russia? How do you think the question of, did those actually work?

Yeah, the Russia sanctions of 2014, I think in retrospect, look a lot worse, I think, than the Iran sanctions leading up to 2015. Part of this was the fact that the crisis took the U.S. government by surprise. There wasn't sanctions ready to go. It wasn't like Iran, where there were years and years to fine-tune the approach. This was something that the Obama administration and its European allies had to put together on the fly. I do think it's possible that the sanctions had some level of a deterrent effect.

on Putin. Putin's had this plan to basically reconstitute what he called Novorossiya, which are a handful of territories in Ukraine's eastern and southern regions that a number of his propagandists put forward in 2014 and 2015. And it really wasn't until these sectoral sanctions

were put in place in that summer that you got the first Minsk agreement, the second Minsk agreement, which freezes the line, and also the formal abandonment of the Novorossiya project. I think we'll never know really the extent to which they were deterred by sanctions. I think it's possible there was an effect. I think the thing that looks worse in retrospect isn't so much

what the Obama administration did in 2014, 2015, it's the lack of follow-up. It's the fact that after this Minsk agreement, Minsk II was signed in February of 2015, the sanctions were kind of allowed to atrophy, both under the Obama administration in the last year and a half of its time in office, as well as during the four years, the entire four years of the Trump administration. And so I think the lesson that Russia winds up taking from the 2014 sanctions is that

Sanctions can be really bad for us, and we really need to prepare in the event that we get hit again. But the West just doesn't have the will to keep ratcheting up the pressure against us over time. So I think that is really where the failure of the 2014 sanctions comes. It's not in the immediate response so much as it's the lack of follow through. And then, of course, I think this is a really dangerous lesson Putin winds up taking into the 2022 invasion.

I think also if the Russians learned that interdependence might make them vulnerable, it also could make Europe vulnerable. Perhaps the decision to double down on Nord Stream and other examples of energy interdependence were driven by an active strategy on Russia to increase Europe's own vulnerabilities after the sanctions were imposed.

Yeah. I think it's remarkable, Chris, that Nord Stream 2 is signed in 2015. That just goes to show the level that, in some ways, Putin was right. The Europeans didn't have the stomach for continued economic pressure on Russia. They're going ahead and signing deals that are making them even more dependent on Russian gas.

right after this. I think Nord Stream 2 is only the most well-known example of your point of Russian infrastructural plays that they made. You also have the power of Siberia pipeline with China that they put in place. This is both to mitigate the harm that the West could impose on Russia, but also potentially to try to gain some leverage over China. That's why you see today China nervous and wary of potentially signing another power of Siberia pipeline deal.

That's a great segue to China, which of course becomes the focus of the first Trump administration when he takes power in 2017. If Iran was small and easy to sanction, Russia medium-sized, harder to sanction, China's of course very, very tough in this regard because of all the blowback that you get. Nevertheless, President Trump starts and then

President Biden continued policy of using a different set of choke points to try to restrain China's technological progress. So walk us through similarities and differences in terms of the use of financial instruments vis-a-vis Russia and Iran, and then the new shift towards export controls in China.

Sure. I think one thing just to state out of the front, there's a question people ask, why have technology export controls been the forefront of U.S. policy toward China? Why is the Commerce Department playing such a big role and the Treasury Department not playing as big of a role? We can intellectualize it. We can come up with really neat answers to it. I think there's also historically contingent factors, one being that

During the first Trump administration, Steven Mnuchin and the Treasury Department were not game for an aggressive China policy. They were pushed back against things like export controls on Huawei, for instance. In some ways, it was personality-driven. I think if you had had a more hawkish Treasury Secretary, maybe you would have seen financial sanctions on Huawei, for instance, in 2019, instead of adding them to the entity list, which is what wound up happening.

So, I just want to put that on the table at the beginning. Whereas, we oftentimes say, "Oh, well, is it because China's uniquely vulnerable to semiconductor export controls?" I think, to a certain extent, it is an important choke point over China. But I also think financial sanctions on Huawei would have been even more impactful, probably, in 2019, to advance the goals of the Trump administration.

The semiconductor part of the story -- and I think, Chris, this is something you tell in your book extremely well as well -- is something that the Trump administration also comes across almost by accident through initially putting ZTE on the denial order on them in April of 2018. This ironically also comes out of the fact that ZTE had violated Iran sanctions.

and then had kind of grossly violated a settlement that Wilbur Ross had signed, I think in his first week as Commerce Secretary in 2017.

And within a few weeks of that denial order being placed on ZTE, this Chinese telecom company, in April of 2018, it almost goes out of business. I think there's a statement which says that the primary activities of the company have ceased, which is pretty remarkable. I think that for people in the Trump administration, the more hawkish wing of the first Trump administration,

They wind up seeing this as an aha moment, that we can use these export controls as a way to really punish specific Chinese companies. Huawei, the interesting thing there is now we think of the Chinese semiconductor export controls primarily driven by the desire to stay ahead of China in artificial intelligence and win the race toward AGI.

The Huawei export controls of 2019 and then when they become broader in 2020 through the foreign direct product role are really motivated primarily by a desire to check Huawei's 5G dominance. I think that the Trump administration, the first Trump administration rightly saw the diffusion of Chinese 5G technology, particularly through Huawei, as something that could eventually give China a choke point that it could weaponize that was on par with the dollar, something that would give

China tremendous infrastructural, economic power over other countries. And so there was a real desire to check Huawei's expansion, particularly its 5G equipment.

And they initially tried to do this through an entity listing in 2019 that has some impact, but doesn't work quite as well as they want. And then the real kind of innovation of the Trump administration is the foreign direct product rule of 2020, where they sort of come up with a secondary sanctions equivalent for export controls and managed to actually get companies like TSMC to stop making chips for Huawei. And then to your point, Chris, the Biden administration looks at what the Trump administration did

Let's build on this." They wind up imposing even broader FDPRs both on Russia and China. Let's zoom out to the global picture at this time as well. Just as the U.S. is ratcheting up restrictions on Huawei, on ZTE, it also begins leaning on some allies to begin to do the same. The Dutch government, for example, begins restricting

or at least declining to offer licenses to the sale of certain tools that are used to make chips to China. You begin to have people in Washington start thinking about, what would a new multilateral framework look like? Of course, during the Cold War, there was an established multilateral group called COCOM.

I mean, many discussions over the last five or 10 years in Washington about, could you envision a new multilateral export control regime that would bring allied countries together to have a coherent set of policies? That hasn't really happened, but there's been informal variants of that. Walk us through how the Europeans, the Japanese, and other players are thinking about this new era when it comes to tech export controls. Sure.

Look, China is the world's leading exporter by far. They're the No. 1 trading partner of 120 different countries. I think one of the big differences between COCOM and the China challenge today is, a lot of these other U.S. allies, be it in Europe or Asia, have a lot to lose. They really fear the ramifications of joining export controls on China.

They also have big companies that make a lot of money selling stuff to China. Just think about how much money ASML could make if they were selling their EUV machines to China. Think about the revenue that is foregone by Japanese companies if they're not selling different components to China. I think it's much harder to build that kind of a coalition today.

And I think what you've seen is, what has been most impactful isn't necessarily some big, giant, multilateral, formal fora. It has been really the U.S. showing that it's willing to act unilaterally. I think this is a...

An uncomfortable lesson for some people. But I think if you look at the Huawei export controls, the Trump administration expended tremendous diplomatic capital to try to get the UK, Germany, the closest U.S. allies, to join their crusade against Huawei. And they failed. The diplomacy did not work. What worked was the threat of the foreign direct product rule.

and basically threatening these countries with penalties that they themselves would be cut off from semiconductor manufacturing equipment from the US, that they would be cut off from software from the United States if they were to continue selling kit to Huawei. So I think that it's incumbent on the US to coordinate with allies. I think that that's

One thing that the current Trump administration should, I think, continue from the Biden administration. Biden has had some success, for instance, bringing the Dutch and the Japanese in particular into at least some alignment with U.S. policy. I think that the risk that the current Trump administration runs is

tariffs, other types of use of punitive economic statecraft against allies is going to cause hedging behavior. It's going to make these countries in Europe and Asia less willing to just go along with U.S. policies.

Let's use that as a segue towards the future. The Trump administration has foreign policy discrepancies with Iran, for sure, with China, for sure. It inherits a sanctions regime on Russia as well. I think there's a general assumption that economic sanctions will play a role in all these relationships.

groups going forward. Let's start with Iran, if we can. You set up Iran as the great success story of sanctions of modern times. The Trump administration, of course, had its own iteration of what it called maximum pressure against Iran. What do you expect in terms of U.S. sanctions on Iran going forward? What are the lessons to be learned from prior iterations that could shape U.S. policy here?

I think that Iran is going to be a very intensive focus of the Trump administration in its first year. The Iranians have been implicated in plots to assassinate President Trump, and I think that those types of things are often taken personally. I also think that there's quite a bit of consensus within the new Trump administration that Iran's nuclear program is an incredibly serious threat.

because of the weakening of Iran's proxy forces in places like Lebanon and even their own air defenses through Israeli strikes, that there may be an incentive for Iran to race for a nuclear weapon now. And so I think that in this first year of the Trump administration, Iran's going to be a very strong priority. I think the challenge today that the Trump administration faces is that Iran is effectively selling all of its oil to China. And so sanctions against Iran

aren't really against Iran. They're against China. It's persuading Chinese refineries to stop buying Iranian oil, Chinese banks to stop paying Iran for that oil. And so I think the Trump administration is going to have to decide

to what extent this Iran maximum pressure 2.0 strategy is a priority of its China relationship. I think one of the lessons that made the China sanctions of the Obama administration, so Obama successful at getting China, for instance, to cut its imports of Iranian oil,

was that it was the top diplomatic priority of Obama's China policy. Oftentimes, in diplomatic meetings, you can tell what the biggest ask is because it's the first thing that's mentioned. When Obama would speak to Xi Jinping in 2012, or when Secretary Clinton or Secretary of State Kerry would speak to their Chinese counterparts in 2012, 2013, Iran was the first topic that was raised. I think you're going to need to see that from the Trump administration to be successful again.

I think the other point, though, beyond just pressure is, what is the goal? Is the goal to get a deal, or is the goal to try to cause regime change? My own interpretation of maximum pressure 1.0 is that there wasn't really that much of a serious vision of what a deal could look like. Trump didn't like the original Iran nuclear deal, and he wanted to bludgeon Iran with sanctions as much as possible.

I think that there is a real prospect right now that you could get a deal with Iran, given how vulnerable they are, given how weak they are. And so my hope is that the current Trump administration views maximum pressure 2.0 as a way to advance diplomacy. So that will mean working with China, working with other members of the P5+1 to try to bring Iran back to the negotiating table and staying close with allies as opposed to threatening them with tariffs and other punitive measures.

I think it's a great point that the debate over Iran sanctions is also a debate about your policy towards China. I think the same is true to some degree with regards to Russia, which has seen a redirection of its oil flows both to China and also to India in a pretty significant

fashion? First off, is that a fair description of the debate about whether and how to ramp up sanctions on Russia? Second, how would you see that developing? Russia still is not nearly as comprehensively sanctioned as Iran. There are more immediate targets that you could go after with respect to Russia. I agree that China is a big factor, but they're not the only factor. You have India that's buying a lot of Russian oil.

even Europe that's still relying on Russia for 20% of its liquefied natural gas imports. There are still Russian banks that are not sanctioned. Rosneft, the largest Russian oil company, is not sanctioned. It's a very different environment. I think you could get to a point where Russia is entirely dependent on China, and that's really their only economic lifeline, in which, I agree, it would become a similar problem. But I think if the Trump administration wants to ramp up pressure on Russia,

They could do it in ways that aren't necessarily directly about pressuring China. I will say, though, that in the

final week, actually, of the Biden administration. The Biden administration imposed secondary sanctions on a Chinese port, an oil terminal that had done business with a sanctioned Russian vessel. And that same week, the port authority in Shandong province banned sanctioned vessels from entering its port. So I do think that Chinese companies are sensitive to the idea of being sanctioned by the United States, something that they really want to avoid to the extent that they can.

I guess the Trump administration faces the same dilemma the Biden administration faced, which is that the more Russian oil you take off the market via sanctions, the more you risk the price of oil going up. It gets back to the point about blowback, which you mentioned all the way, dating back to the first period of Russia's sanctions. Yes, I think that's right.

One lesson of the Biden administration's sanctions campaign against Russia in 2022 is that economic warfare now has just as many political downsides as military force does. I think it's fascinating to see in the final months of the Biden administration,

It seemed like President Biden had an easier time deciding to allow Ukraine to use U.S. weapons to strike targets inside Ukraine than he was about aggressively sanctioning Russia's oil sales. So it just goes to show that we sort of got into this age of economic warfare because we didn't think there was any political support for military force, and so we needed to find something different. But then when you're thinking about sanctioning Russian oil or sanctioning big Chinese tech giants,

You really have to think about the political ramifications at home and be honest about the limits of what we're willing to do. One final point, though, on oil that could be different with respect to the Trump administration is that the current Trump administration is very clear that they want to boost domestic U.S. oil and gas production. And so there probably are elements within the current Trump administration who say that, look,

If Russian barrels are coming off the market and raising prices, this will create more profitable opportunities for shale in the U.S. to boost production. It wouldn't be such a bad thing for American companies to take market share from Rossnaft over the long term. I think that, in some ways, because of the Trump administration's perspective on fossil fuels, they may not have as...

They may not have the same qualms that the Biden administration did about temporarily raising oil prices.

One interesting that our conversation started with the financial system and ended with oil exports, in some ways a return to some earlier tools of economic warfare. Eddie, thank you for taking the time to introduce your book to us. That was Edward Fishman, author of Choke Points, American Power in the Age of Economic Warfare, available now online or at a bookshop near you. I'm Chris Miller. You've been listening to Intelligence Squared. Thanks for joining us.

Thanks for listening to Intelligence Squared. This episode was produced by myself, Mia Cirenti, and it was edited by Mark Roberts.

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